But despite an increasing edge on Red Hat's domain, some analysts believe that Oracle's Unbreakable Linux strategy is more about competing with Microsoft than it is about chipping away at Red Hat. "Oracle's strategy is to own as many customer touch points as it can," said analyst Matt Aslett at the New York-based 451 Group. "The company will tell you this is so it can provide customers with 'more value and increased services,' but locking out [Microsoft] is a nice little side win."

Edging in on Red Hat That's not to say that Oracle's strategy doesn't include Red Hat. CEO Larry Ellison was eager to highlight the company's momentum during Oracle's annual OpenWorld user conference in San Francisco last week. In his keynote, he also advanced an anti-Red Hat message by accusing the Raleigh-based Linux distributor of perpetrating buggy code. "With the Red Hat code, all we did for the first year was fix bugs," he said. "Now Oracle is growing a lot faster than Red Hat."

[Oracle will tell you that Unbreaksble Linux] provides customers with 'more value and increased services,' but locking out [Microsoft] is a nice little side win.Matt Aslett, analystthe 451 Group

Further, many customer wins in 2007 came from existing Red Hat customers, Oracle executives claimed. "We believe we have displaced Red Hat in many implementations," said Monica Kumar, Oracle's senior director of Linux and open source marketing. "Many of the customers that have come to Oracle for Linux support are Red Hat customers, and to us that is displacement."

But Red Hat's financial picture doesn't suggest that it's taking a beating from Oracle. Rather, Red Hat revenue has increased to $400 million, up from $278 million in 2006. And the ever-important category of subscription revenue was up 29% year over year to $109.2 million in Q4.

Aslett said that Microsoft is one of the few vendors in the world with the reach, depth and coffers to match Oracle -- not Red Hat -- and that the Redmond independent software vendor is the true threat to Oracle's software business.

These days, Linux and Windows are the main platforms on which enterprises will deploy databases, said Noel Yuhanna, an analyst at the Cambridge, Mass.-based Forrester Research Inc.. "Although Oracle database management systems used to dominate the Windows platform eight years ago, today it's SQL Server. Oracle is already betting on Linux to succeed by putting strong R&D and marketing efforts around it. If Linux grows, Oracle grows," he said.

Thus, a win for Linux is a win for Oracle as it immediately eliminates SQL Server, Exchange and Visual Studio from the equation and increases the likelihood that a customer will choose Oracle software, Aslett said.

In October, for example, Heimir Sverrisson, the chief architect for the Manchester, N.H.-based transportation management firm Cadec Global LLC, said he dumped SQL Server for Oracle 10g on RHEL 4 because of scalability issues. Red Hat's software updates sufficed, so Sverrisson did not see a need to buy support from Oracle.

"You could question why Oracle is paying so much attention to Linux," Aslett said, "given that its revenue from Unbreakable must shrink in comparison to the other areas of its business, but that misses the point. It isn't really important for Oracle to make money from Unbreakable Linux. … What is important is that it strengthens Oracle's relationship with its customers and keeps competitors out."

Accrding to Aslett, "The significant factor here is Oracle's desire to increase its influence over its customers' IT estates."

Ellison said as much in an April 2006 interview with the Financial Times . At the time, Ubuntu sponsor Canonical Ltd. and Novell were floated as possible acquisition targets, but Ellison dismissed the idea out of hand.

"I don't think we'll make a lot of money in the Linux operating system business, I don't think it's going to be a hugely profitable business for us," he said. "But it will allow us to deliver a higher quality of service to our customers because we've tested the whole stack; we know it works."

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